Singapore Issues Stark Warning: Could Stablecoins Trigger the Next Financial Crisis?

Singapore's financial watchdogs are flashing red—stablecoins aren't just digital dollar clones anymore. They're potential systemic risks.

Here's why regulators are sweating:

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Liquidity mirage
: Stablecoins promise 1:1 backing, but audits remain as opaque as a hedge fund's offshore accounts. When the peg breaks—and it will—the domino effect could make 2008 look quaint.

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Shadow banking 2.0
: These tokens now facilitate more daily transactions than some small economies. Yet they operate in regulatory gray zones, bypassing capital requirements that keep traditional finance (mostly) honest.

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The contagion risk
: When a top-3 stablecoin wobbled last year, it briefly tanked crypto markets by 15%. Next time, expect pension funds and ETFs to catch the shrapnel.

Meanwhile, crypto exchanges keep minting new stablecoins like monopoly money—because nothing says 'financial innovation' like recreating the 19th-century free banking era with blockchain buzzwords.

Singapore's move? A new licensing framework that forces issuers to hold actual reserves. Cynics note it's about control as much as stability—after all, why let decentralized finance disrupt the central bankers' monopoly?

One thing's clear: the era of treating stablecoins as harmless utility tokens is over. Whether that prevents crises or just legitimizes them remains the trillion-dollar question.

Regulators Draw A Clear Line

According to Monetary Authority of Singapore Managing Director Chia Der Jiun, some unregulated stablecoins have a “patchy record of keeping their peg.”

He warned that sudden losses of confidence in those tokens can resemble money-market fund runs from 2008. Chia added that such coins are “not suitable as SAFE settlement assets for large wholesale transactions.”

His remarks came in a keynote at the Singapore FinTech Festival and make clear that the city-state intends to favor well-capitalized, closely supervised issuers for settlement uses.

Rules Focus On Reserves And Redemption

Based on reports, MAS is preparing legislation that builds on a regulatory framework released on Aug. 15. The framework sets reserve backing and redemption reliability as the main tests for eligibility. In short: issuers must show credible backing and practical ways for users to redeem tokens.

Over time, Chia said, if certain stablecoins grow big enough to affect the wider system, rules will need tightening and cross-border cooperation will be required. Access to central bank facilities was mentioned as a possible future step for truly systemic tokens.

According to a Binance Research report, the global stablecoin market passed $300 billion in total capitalization in October 2025. Daily average transaction volumes reached $3.1 trillion.

Monthly stablecoin payments have topped $10 billion as of August 2025, with 63% of that volume tied to B2B activity. These numbers show why regulators are paying attention.

They also help explain why USDT and USDC remain dominant players as use moves beyond trading into payments and business flows. Bitcoin’s rise above $120,000 has also been cited as one factor increasing overall market activity.

Chia also outlined MAS’s broader view of settlement assets, mentioning wholesale central bank digital currency and tokenized bank liabilities.

The regulator’s BLOOM initiative — Borderless, Liquid, Open, Online, Multicurrency — is testing how those instruments might work together inside a tokenized finance system.

Financial firms and clearing networks were urged to run trials under the initiative so practical issues can be spotted early.

Featured image from Unsplash, chart from TradingView